To OTC Journal Members:
 

Pickle (OTC BB: SPKL) Powers Up Company Owned Stores

We've been getting a little sell off in Spicy Pickle of late as the company has been on the quiet side in a tough market. Like a duck on a pond, this bird appears to be crusing serenely- but the legs are paddling furiously below the surface- you just can't see them. Now we know why. SPKL is about to get very noisy again.

Post close Friday, news came out which is hugely positive for the future of the company, and now would be one heck of a good time to pounce on an oversold situation. Traders and long term investors have an outstanding entry level right now in my view.

Let's go over Friday's events post close before we look at the stock. There were two major announcements.

First an foremost, SPKL announced it closed a $6 million financing on Friday. Funds from the financing are earmarked for the rapid expansion of company owned stores. Clearly, a good thing for shareholders.

Here's how the money was raised:

• SPKL sold 705 shares of preferred stock, which can be converted into 7.05 million shares of common stock with a fixed price of $.85 per share. This is a reasonable discount to the market at a fixed price, which makes it non toxic. The higher the stock goes, the more money the investors make.
• The shares are convertible into unregistered stock at this time, so it will be a while before any of those shares find their way into the open market. Six months is a likely time frame for the shares to become free trading.
• As part of the financing, SPKL issued an additional 5.3 million warrants, which convert into the common stock at $1.60- a substantial premium to the current market, and an opportunity to raise another $8.48 million when the stock is much higher. The stock needs to be at least $2 for these warrants to really be worth anything to the holders.
• The common stock represents a possible 15% dilution of stock in return for the $6 million SPKL now has to invest in growth.

Here's the value for shareholders. At the present time, SPKL should be delivering about $3.5 million in annual revenues- in short order they will have the company store opened, and about 35 stores contributing regular residual revenues.

They can take Friday's capital, and open somewhere in the range of 12 to 15 more company owned stores. This will translate into about $10 million and $13 million in top line revenues, and about $1.5 to $2.5 million in positive cash flow. In short, by giving up 15% of the company, SPKL is now positioned to more than quadruple its top line.

There's a second, and equally compelling reason to love this new capital. Having this extra money gives the management of SPKL lots of expansion flexibility. For example- suppose they happen on a perfect location in LA, but don't have a franchisee in place. They can pounce on the property, lock it up, get the permitting started, and begin the construction process. Then, they can either own and run the store, or transfer it to a franchisee.

Likewise, they can jump on real estate in an area where they have a developer who is planning on opening more stores, but not quite ready to expand. In that case, they can start the process, and transfer it to their franchisee as well.

There is one more very interesting and compelling component to this financing- check out the investors: In 20 years, I've never seen this in a microcap. According to the press release, two of the investors- who are also independent members of the board of directors, invested $1.3 million of the $6 million. In all the years I have been doing this, I have never seen board members cast this kind of vote of confidence. If the board members are willing to risk $1.3 million, what does that say about the future of the company? My company's Defined Benefit Plan invested in 12 of the units for a total of $102,000.  This translates to 120k shares at $.85 (not free trading), and 90,000 warrants with a $1.60 exercise price (not free trading). I inform you for full disclosure.

Those of you who were asking for more company owned stores- you got it. The company is now positioned to expand even more rapidly in '08 than it did in '07.

Now, let's have a look at Friday's 2nd press release. SPKL announced two more new stores have opened in the last two weeks- One in Phoenix, AZ, and a second Reno, NV store.

This brings us to 35 stores open and operating in 15 different different states. We'll probably finish the year at the 37 or 38 store mark, so making the 40 store number will take us into January of '08. Remember- they still aren't have way through the commitments- they still have about 60 more stores to open out into '08 and '09.

The Phoenix store, located at 3235 W. Ray Rd., in Chandler, AZ is in a booming part of the city. If you live in the Phoenix area, you can now go try the food, which in my mind is the single most compelling reason to own this stock. Go Try The Food!!

Now might be a great time to review the video presentation on the company. Remind yourself why so many of us love this idea as a potential money maker for investors. Click Here to see the presentation.

I'm including the press release on the financing for your review. If you want to look at store locations, I refer you to the map on the company web site: Click Here to find the closest Spicy Pickle to you. Here's the big news:
 

Comments in the BLOG

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Go Here to view our compensation on every company we have ever covered, or visit the following web address:  http://www.otcjournal.com/disclaimer.html for our full profiles and http://www.otcjournal.com/trading-alerts/disclaimer.html for Trading Alerts. Larry Isen, the editor and publisher of the OTC Journal, through various entities he controls, has purchased 1,200,441 shares of Spicy Pickle at an average cost of $.2125 per share. These purchases were made in Spicy Pickle private offerings. The aforementioned purchases were made between August of 2005 and August of 2006. On 12/15/07, on entity controlled by Larry Isen participated in an additional financing wherein 12 shares of convertible preferred, converting at $.85 into 120,000 shares and 90,000 warrants with an exercise price of $1.60 were purchased. In addition, Larry Isen has received 785,000 shares of Spicy Pickle common stock for consulting services. In addition, MarketByte LLC, an entity controlled by Larry Isen, has received a fee of $30,000 cash, and 300,000 newly issued restricted shares for coverage of Spicy Pickle. TGR Group LLC, the publisher of the Small Cap Network, has received $30,000 and 300,000 newly issued restricted shares for coverage of Spicy Pickle. Mr. Isen is an affiliate of TGR Group. In addition, two other individuals affiliated with TGR Group have purchased a total of 300,000 shares at $.25 per share and received an additional 70,000 for consulting services.

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